Portuguese GDP fell 1.2% qoq in Q2 after -0.1% in Q1. In the last quarters, GDP growth has been very volatile, which is typical of periods of uncertainty. Macrometria believes that GDP is currently falling 0.7%-0.8% on trend.
The demand details are not yet available but international trade data in Q2 suggests that the contribution from external demand was positive given that exports fell less than imports. The Portuguese statistics Office (INE) states that investment fell very sharply in the three months to June. In the next few quarters we expect further activity declines, albeit less severe than in Q2, given that many austerity measures remain to be implemented. For instance, the effects of the labour market reform should only start being felt in the second half of the year. Moreover, in the fourth quarter, pensioners (November) and civil servants (December) will lose their second holiday pay.
In the Eurozone, GDP fell 0,2% qoq after being flat in Q1. This decline reflects very different country developments. Germany surprised on the upside, with GDP rising 0,3% qoq despite declining industrial production in recent months. French GDP has been flat in the last three quarters. Italian and Spanish GDP fell by 0.7% and 0.4% respectively. Though Germany and France surprised on the upside, this is unlikely to prevent the ECB from adding further fuel to the economy after the summer, in the form of new quantitative measures.